Taking a gamble on bird flu

Novavax raises $38 million, sees stock rise, after shifting focus to vaccine development

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March 23, 2006|By BLOOMBERG NEWS

When Rahul Singhvi took over Novavax Inc. last August, the drugmaker had less than $5 million and was losing money on its biggest product. Within days he decided to bet on an experimental bird-flu vaccine.

The gamble is paying off for Novavax, which was based in Columbia until it moved to Malvern, Pa., in 2004, and still does much of its bird-flu work in Rockville. The company has raised $38 million after changing its focus and the stock has jumped eightfold since Singhvi, 41, became chief executive officer. Novavax's most recent financing included $12.5 million from Kleiner Perkins Caufield & Byers, the Silicon Valley venture capital firm that backed Google Inc. and Genentech Inc.

Drugmakers such as Sanofi-Aventis SA and Chiron Corp. are racing to prepare for a possible pandemic as the avian influenza virus has spread from Asia to Europe, Africa and the Middle East, killing at least 98 people. Winning support from Kleiner Perkins sets Novavax apart from other small vaccine developers such as Vical Inc. and Avant Immunotherapeutics Inc., said Ken Trbovich, an analyst at RBC Capital Markets. He rates Novavax shares "sector perform" and doesn't own the stock.

The company's bird-flu funding includes $1.6 million from the National Institutes of Health. The U.S. is investing in research technology, such as that being developed at Novavax, to break away from the limitations of the current method of growing flu vaccine in eggs.

The egg-growing approach involves a 50-year-old process that can take months to produce a batch of vaccine, said Dr. Anthony S. Fauci, director of the National Institute of Allergy and Infectious Diseases in Bethesda.

"We're trying to have alternative ways of developing influenza vaccine," Fauci said.

Novavax also is working with researchers at the University of Pittsburgh, where more than 50 years ago Jonas Salk discovered the polio vaccine. Through the Pitt collaboration, scientists are testing Novavax's vaccines in animals.

The vaccine is grown in cells instead of eggs, making it easier to produce in large amounts, said Ted Ross, an assistant professor at Pitt, who is leading the university research. Egg-based flu shots take as long as a year to turn out after a strain of influenza is identified as a threat, he said.

"Within six months, a product could be on the market" using the new technique, Ross said. "That's faster than what we have now."

Novavax's Rick Bright, 39, a former Centers for Disease Control and Prevention scientist who became vice president for vaccine research last month, said the company may be able to make vaccines in just four months. It is developing the vaccine to work with a portable manufacturing system that can be wheeled into an empty warehouse anywhere in the world that a flu outbreak erupts.

Bright, who was in the CDC's flu division for 10 years, said he joined Novavax because the company's technology allows for fast production and is safe. The product also provides a good match between the virus and the vaccine, he said.

"This approach has the best data indicating that it would be able to stop or halt a pandemic spread," Bright said. "It's the best solution I've worked with or seen in progress."

The Novavax product relies on the company's so-called virus- like particle technology. The method allows researchers to create a vaccine that mimics a virus without using bits of actual microbe that can cause some people to get the infection.

Most vaccines, like the ones for smallpox and polio, are made from parts of a virus that, when injected into a person, spur the body to generate a protective immune defense. The Novavax vaccine uses virus-like particles created in the lab that trick the body into reacting as if it has been exposed to the infectious agent.

Even under a program by the U.S. Food and Drug Administration that will speed approval of pandemic flu vaccines, Novavax's product probably won't be cleared for mass distribution until 2008, Bright said. Researchers are preparing to start the first human trials this year.

Singhvi, a chemical engineer who spent a decade at Merck & Co.'s vaccine division before joining Novavax, said the company's focus on bird flu has made it more attractive to investors. When he joined the company, it was selling a money-losing estrogen cream for treating hot flashes. By year's end, Novavax had $32 million in the bank, mostly a result of attracting investors after the Aug. 15 publication of the company's bird-flu research in the journal Vaccine.

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